Denmark Tax Deductions: A Guide for Foreign Investors (2025)

Corporate Tax Deductions:

• Operating Expenses:
  • Ordinary and necessary business expenses are generally deductible.
    This includes:
    • Salaries and wages
    • Rent and utilities
    • Office supplies
    • Marketing and advertising costs
    • Travel expenses (within reasonable limits)
  • It is absolutely vital to maintain meticulous records.
• Depreciation:
  • Depreciation of tangible and intangible assets is deductible.
  • Denmark uses a straight-line depreciation method for most assets.
  • The specific depreciation rates and asset categories should be verified with the Danish Tax Agency (Skattestyrelsen), as they can change.
• Interest Expenses:
  • Interest expenses on business loans are generally deductible.
  • However, there are thin capitalization rules that may limit the deductibility of interest paid to related parties.
• Bad Debts:
  • Bad debts can be deducted if they are proven to be irrecoverable.
  • Adequate documentation is required.
• Research and Development (R&D) Expenses:
  • Denmark offers tax incentives for R&D activities, including deductions for R&D expenses.
  • It is important to verify the current R&D incentive programs with the Danish Tax Agency.
• Pension Contributions:
  • Contributions to approved pension schemes are deductible.

Individual Tax Deductions (for Foreign Employees/Self-Employed Individuals):

• Employment-Related Expenses:
  • Certain expenses related to employment, such as professional subscriptions and work-related travel, may be deductible.
  • The rules for deductibility of employment-related expenses should be verified with the Danish Tax Agency.
• Pension Contributions:
  • Contributions to approved pension schemes are deductible.
• Interest Expenses:
  • Interest expenses on mortgage loans may be deductible.
  • The rules regarding mortgage interest deductions can change, and must be verified.
• Charitable Donations:
  • Donations to approved charitable organizations are deductible.
• Commuting Expenses:
  • Certain commuting expenses can be deducted.

Important Considerations for Foreign Investors:

• Documentation:
  • Maintain accurate and complete records of all expenses.
  • Documentation is essential to support your deductions.
• Double Taxation Treaties:
  • Familiarize yourself with the relevant double taxation treaty between Denmark and your home country.
• Tax Residency:
  • Understanding your tax residency status is crucial for determining your tax obligations.
• Professional Advice:
  • Seek professional tax advice to ensure compliance and maximize your deductions.
• Digitalization:
  • Be ready to handle digital paperwork.

Key Takeaway:

• Denmark offers a range of tax deductions to support businesses and individuals.
• Accurate documentation and compliance are essential.
• It is always wise to seek professional tax advice.